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Damon : Real Estate Advice

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Mon May 30, 2011
Don Tepper answered:
No one can answer that definitively, not even a financial planner or a Realtor. It depends on development, on trends in real estate, on the general economy, and on your particular needs.

However, let me offer a more general opinion. Take it with a grain of salt, though.

No, it's not a good idea.

First, the investment will be a financial drain for 20 years. You'll have to pay taxes on all that land. Be responsible for upkeep. You don't say whether the home is one you'll be living in, or a rental. If you're going to be living there and it's priced comparably with other homes you might consider, that's OK. You've got to live somewhere. Otherwise, though, you'll be overpaying.

Take advantage of compounded interest. Make an investment today that will compound over time. Since you're looking at real estate, consider some investment properties that are producing income. Take that income and either, over time, invest in other properties or put it into something else--like an IRA with mutual funds.

Another point: Consider a self-directed IRA to do your investing through. You can't use it for any place you'd live, but (with restrictions) can use it for investment properties.

Also, make sure that you're not putting all your eggs into one basket. If buying 25 acres and waiting 20 years would only take, say, 10%-20% of your available retirement funds, then (though I still don't think it'd be a good investment), you could probably safely do it. But don't put 50%-75% or more of your available funds into undeveloped land. Or, perhaps, even into rental properties. Consider what happened a few years ago with real estate values. You need a reasonable level of diversification.

Your first stop, though, should be a financial advisor.

Hope that helps.
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